Rental Property Depreciation Calculator + Landlord Guide

Rental property depreciation lets U.S. landlords recover the cost of eligible income-producing property over time, but the calculation is not simply “purchase price divided by 27.5.” Land is not depreciable, the depreciable basis can require adjustments, and the first and final years are affected by the placed-in-service date and the IRS mid-month convention.

This page gives a planning estimate for U.S. residential rental property under the general MACRS framework. It is educational, not tax advice. Use current IRS guidance and a qualified tax professional for an actual return.

Quick rental property depreciation calculator

For a rough full-year planning estimate:

Estimated annual building depreciation = depreciable building basis ÷ 27.5

This shortcut is useful only for a full-year estimate. The first and final tax years generally require the IRS mid-month convention, so the tax-return amount can differ.

Step 1: Find the property’s starting basis

IRS Publication 527 explains that the basis of property used in a rental activity is generally its adjusted basis when placed in service. For purchased property, basis commonly starts with cost and can include certain acquisition costs, then changes for specific adjustments.

Always work from the actual property records rather than an online estimate when preparing taxes.

Step 2: Separate land from the building

Land cannot generally be depreciated because it does not wear out in the same way as a building. The purchase price therefore needs to be allocated between land and depreciable property.

IRS Publication 527 specifically states that the cost of land is not depreciable. citeturn988481search4

Step 3: Determine depreciable building basis

A simplified planning calculation is:

Depreciable building basis = adjusted property basis − land basis

Additional adjustments may apply for improvements, casualty events, credits, personal-to-rental conversion, and other situations. If a former personal residence is converted to rental use, special basis rules can apply; IRS Publication 527 explains that the basis for depreciation may be limited to the lesser of adjusted basis or fair market value at conversion in that situation.

Step 4: Divide residential rental building basis by 27.5 for a full-year estimate

Residential rental property placed in service under the current MACRS rules is generally depreciated over 27.5 years using the applicable convention and method described by the IRS.

For a rough full-year estimate, divide the depreciable building basis by 27.5.

Example depreciation estimate

Assume:

• purchase and basis-related amount used for this simplified example: $330,000;
• allocated land basis: $55,000;
• simplified depreciable building basis: $275,000.

Estimated full-year building depreciation:

$275,000 ÷ 27.5 = $10,000 per full year

This is only the building estimate. It does not calculate separate depreciation schedules for appliances, furniture, improvements, or other property, and it does not apply the first-year mid-month convention.

Why the first year is different

Residential rental real estate generally uses the mid-month convention. In practical terms, the month the property is placed in service affects the first-year amount. A rental placed in service in January receives more depreciation in that tax year than one placed in service in December.

For tax filing, use the IRS tables or approved tax software rather than applying the simple annual formula blindly.

What does “placed in service” mean?

Depreciation begins when the property is ready and available for its intended rental use, not necessarily when the first rent payment arrives. The actual facts matter, so keep records showing when the property became available for rent.

What records should a landlord keep?

• closing documents and purchase records;
• land/building allocation support;
• settlement and acquisition-cost records;
• improvement invoices and contracts;
• placed-in-service date support;
• prior depreciation schedules;
• records of casualty losses or insurance reimbursements where applicable;
• records of business/rental vs personal use;
• sale or disposition records.

Repairs and improvements are not the same thing

Routine repairs and capital improvements can receive different tax treatment. A repair may be currently deductible in some circumstances, while an improvement may need to be capitalized and depreciated. The classification depends on the facts and current tax rules.

Use our How to Track Rental Property Repairs for Tax Records to keep the supporting documents organized.

What about appliances, furniture, and other assets?

Some rental assets can have recovery periods different from the building. Do not combine every asset into the 27.5-year building calculation automatically. Tax software or a tax professional can help build separate depreciation schedules where appropriate.

Does depreciation depend on property value today?

Depreciation is generally based on tax basis and the applicable depreciation rules, not on the property’s current market value. A property can appreciate in the real-estate market while the depreciable building basis is still being recovered under the tax rules.

What happens when the property is sold?

Depreciation can affect the tax consequences of a later sale, including potential depreciation recapture rules. This page does not calculate sale taxes. Keep complete depreciation schedules from year to year so the cumulative history is available when needed.

A practical landlord depreciation worksheet

Input	Example
Adjusted basis before land allocation	$330,000
Land basis	$55,000
Depreciable building basis	$275,000
Residential recovery period	27.5 years
Rough full-year estimate	$10,000
Placed-in-service month	Use IRS mid-month rules for actual filing

Use official IRS guidance for the actual return

The primary reference for U.S. residential rental property is IRS Publication 527. It explains depreciable property, basis, recovery periods, conventions, personal use, expenses, and related rental-property rules.

Where the Property Management Binder fits

The Property Management Binder does not calculate tax depreciation or replace tax software. It helps keep the underlying property records—improvements, maintenance, invoices, assets, insurance references, and supporting documents—organized so the financial history is easier to reconstruct.

Also see the Rental Property Income & Expense Log and Rental Property Tax Document Checklist.

Frequently asked questions

How many years do you depreciate a U.S. residential rental building?

Residential rental property is generally depreciated over 27.5 years under the applicable MACRS rules.

Can land be depreciated?

Generally no. IRS guidance states that land is not depreciable.

Can I use purchase price divided by 27.5?

Not reliably. Land must be separated, basis may require adjustments, and first-year timing matters.

Is this calculator enough to file my taxes?

No. It is a planning estimate and educational guide. Use current IRS rules, tax software, and professional advice where appropriate.